Tuesday, 26 November 2013

N220bn MSMED fund ready for disbursement as CBN finalises modalities

The N220 billion Micro, Small and Medium Enterprises (MSME) Development Fund is on the verge of being disbursed to micro-finance banks as the Central Bank of Nigeria (CBN) finalises the modalities for accessing the fund, BusinessDay has learnt.

The fund was launched in August this year, three years after it was first pronounced in September 2010 by the CBN and President Goodluck Jonathan.

Operators are already warming up to access the fund as they have compiled their application forms and submitted to the CBN for approval.

The central bank had said it would engage only micro-finance banks with good track records for the disbursement of the N220 billion ($1.34 billion) under the direct lending to MSMEs scheme.

It would also consider the financial health of the grassroots banks before they can serve as conduits for new stimulus package by the regulator to energise the economy through lending to small businesses.

When contacted on phone about the current health status of micro-finance banks in the country, Olufemi Fabamwo, director, Other Financial Institutions and Supervision Department (OFID), CBN, said: “I only confirmed that the modalities for accessing the fund are being finalised. The MFBs are healthy.”

However, CBN’s current report stated that from prudential examination conducted on 792 MFBs, 558 (70.4 percent of the total) met the prescribed capital adequacy ratio of 10.0 percent, the same as in the preceding year, while 82.9 percent met the required minimum liquidity ratio of 20.0 percent, compared with 84.0 percent in the preceding year.

The average portfolio-at-risk (PAR), or non-performing loan, stood at N30.18 billion or 42.0 percent, higher than the prudential maximum of 5.0 percent, compared with 46.0 percent recorded in 2011.

Jethro Akun, national president, National Association of Micro-finance Banks (NAMB), told BusinesDay that application forms for accessing the fund had been compiled and sent to the CBN for approval.

He strongly believed that before the end of the year, the CBN would release the approved forms and subsequently allow micro-finance banks access to the fund for on-lending to low-income earners.

Responding to the development, Godwin Ehigamusoe, managing director, LAPO Micro-finance Bank Limited, said after the launch of the fund, the regulatory authority might be doing a few things like setting up institutions, guidelines, hiring people who would manage the fund, among other things.

“Looking at the level of commitment the CBN has demonstrated towards the establishment of the fund, I strongly believe that not long from now the fund will go into operation,” he said.

However, the MSMEDF guidelines listed such conditions to be met by the banks and finance companies to include compliance with regulatory capital, compliance with prevailing prudential ratios, average deposit growth rate of 20 percent per annum (for institutions operating for over two years), and average clientele base growth rate of 20 percent per annum (for institutions operating for over two years).

Also listed are risk management framework acceptable to the regulators, corporate governance culture acceptable to the regulators and as indicated by adherence to sound ethical values, degree of separation of ownership from control/management, Number of non-performing insider related facilities, among others.